In these days of economic uncertainty it is more important than ever that insurance companies are adequately covered

for the ‘expected’ deluge of claims they are likely to encounter from clients. It is, therefore, essential that they are privy to

excellent legal advice.

INSURANCE AND REINSURANCE

Reinsurance is a means by which an insurance

company can protect itself with other insurance

companies against the risk of losses. Individuals

and corporations obtain insurance policies to

provide protection for various risks (hurricanes,

earthquakes, lawsuits, collisions, sickness

and death, etc). Reinsurers, in turn, provide

insurance to insurance companies.

There are myriad reasons why an insurance company might

choose to reinsure as part of its responsibility to manage a

portfolio of risks for the benefit of its policyholders and investors.

The main use of any insurer that might practise reinsurance is

to allow the company to assume greater individual risks than its

size would otherwise allow, and to protect a company against

losses. Reinsurance allows an insurance company to offer

higher limits of protection to a policyholder than its own assets

would allow.

An insurance company’s writings are limited by its balance

sheet (this test is known as the solvency margin). When that

limit is reached, an insurer can do one of the following: stop

writing new business, increase its capital, or buy “surplus

relief” reinsurance. Buying reinsurance is usually done on a

quota share basis and is an efficient way of not having to turn

clients away or raise additional capital.

The insurance company may be motivated by arbitrage in

purchasing reinsurance coverage at a lower rate than what

they charge the insured for the underlying risk, which can be

in the area of risk associated with any form of the asset that is

being issued or loaned against. It can be a car, a mortgage, an

insurance (personal, fire, business, etc.) and alike.

By choosing a particular type of reinsurance method, the

insurance company may be able to create a more balanced

and homogenous portfolio of insured risks. This would

lend greater predictability to the portfolio results on net

basis (after reinsurance) and would be reflected in income

smoothing. While income smoothing is one of the objectives

of reinsurance arrangements, the mechanism is by way of

balancing the portfolio.

Corporate INTL spoke to a number of leading advisers in

this specialist practice area about their offering and the laws

governing Insurance and Reinsurance in their jurisdiction.

“THERE ARE MYRIAD REASONS WHY AN

INSURANCE COMPANY MIGHT CHOOSE

TO REINSURE AS PART OF ITS RESPONSIBILITY

TO MANAGE A PORTFOLIO OF RISKS FOR

THE BENEFIT OF ITS POLICYHOLDERS AND

INVESTORS……..”

Insurance.indd 1 18/9/09 17:40:18

“It is likely that the domestic aspects of the Insurance Act 2004 will be split off

in the near future and enacted in separate legislation which will allow for further

development of the captive sector but also strengthening of the reinsurance and

onshore sectors as well.” - Carlyle K. Rogers

The Man

Carlyle K Rogers has more than ten years experience in financial services hav-

ing served as Deputy Director of the Anguilla Financial Services Commission

and its predecessor body, the Financial Services Department of the Govern-

ment of Anguilla, for seven where he was responsible for regulating corporate

and trust service providers, licensing fund managers and administrators,

approving fund applications and enforcing Anguilla’s anti-money laundering

regime amongst other duties.

He is Managing Director of Global Consultants and Services (Anguilla)

Limited, Global Trustees (Anguilla) Limited and Global Insurance Manag-

ers (Anguilla) Limited. He holds Associates of Arts (Business Management),

Bachelors (Finance), Masters of Business Administration (Finance), LLB

(Hons) and LLM (Commercial and Corporate Law) degrees from the Uni-

versity of the Virgin Islands (St. Thomas), City University (London) and the

University of London. He has also recently completed a certificate in captive

insurance management from Glasgow Caledonian University in Scotland,

UK. Carlyle is the current Chairman of the Anguilla Branch of the Society of

Trust and Estate Practitioners, and a member of the International Tax Plan-

ning Association, the Anguilla Financial Services Association and the

Asia Offshore Association.

The Firm

Global Consultants and Services (Anguilla) Limited is a registered

agent. Our related companies provide trustee and insurance manage-

ment services. This distinguishes us in that we are able to provide a

full-suite of services including incorporating companies for licensing

while providing registered agent/office services, assisting with the

preparation of the licence application, serving as insurance manager

after the licence has been granted and acting as trustee of the shares

if the client wishes to add an asset protection feature to the ownership

structure by placing the shares in a trust.

We focus on small to medium sized businesses and high net worth

individuals who have specific insurance needs which are not being

met by the traditional market at affordable rates. Recently, we helped

a Slovenian entrepreneur launch a company to provide insurance

for a specialized product in Eastern Europe and a US entrepreneur

provide for his specific insurance needs which covered his personal

risks as well as those of his many businesses which covered real estate,

construction and company incorporation services.

Anguilla’s legislation is set out in the Insurance Act 2004 which

covers domestic insurance, reinsurance and captive insurance. The

legislation is simple and provides maximum flexibility to meet the

needs of small to medium sized enterprises with reasonable capital re-

quirements which are adjusted based on the scope of operations of the

insurer and the risk level being underwritten as well statutory filings.

This allows clients the scope to structure their operations with as much

freedom as possible in conjunction with the regulators.

Clients are focused on asset-protection strategies and self-insurance

through captives for financial and other risks for which coverage is

difficult to secure.

Federal Law No. 6 of 2007 on the Establishment of an Insurance Authority and

Regulation of Insurance Business (the “Insurance Law”) governs insurance

companies operating in the United Arab Emirates (excluding the free zones).

The Insurance Law has repealed the Federal Law No. 9 of 1984 Regarding

Insurance Companies and Agents as amended (“Previous Law”) which previ-

ously regulated insurance companies in the United Arab Emirates. However

the regulations issued under the Previous Law continue to be applicable to the

extent that they are not inconsistent with the provisions of the Insurance Law.

Under the Insurance Law, an insurance authority has been established as a

corporate body with financial and administrative independence (the “Author-

ity”) to regulate and supervise the insurance sector. Insurance policies sold or

distributed in the UAE must be submitted to the Authority along with all the

general and special conditions, rates of premium and the redemption tables.

Further insurance products must be issued by insurance companies registered

in accordance with the provisions of the Insurance Law.

Afridi & Angell is a law firm with offices in Dubai, Abu Dhabi and Sharjah in

the United Arab Emirates. The main areas of the UAE practices are comprised

of corporate and securities, commercial banking, Islamic finance, insurance,

maritime, project development and finance and dispute resolution. The firm is

the UAE member of Lex Mundi, an international Association of over 120 inde-

pendent law firms with more than 300 offices worldwide.

The firm advises clients with respect to corporate and regulatory

issues facing underwriters, insurers, brokers and agents, including

risk financing problem investments, permitted insurance activities,

director and officer liability and insurance and reporting require-

ments. The firm also acts on behalf of clients with respect to insur-

ance disputes.

We have advised several foreign life insurance companies, par-

ticularly from India on the manner in which they should structure

their operations in the UAE. While at present branch offices of

foreign insurance companies are not being licensed the Authority

licenses representative offices to act as a liaison office for the parent

company. The exact scope of the activities of a representative office

is not very clear and essentially a representative office may only deal

with insurance intermediaries (such as licensed brokers and agents)

and not directly with the customer.

We have also advised several banks on marketing and sale of Ban-

cassurance products. Commercial banks, investment banks and

investment companies in the UAE market and distribute financial

and investment products which have insurance wrappers. Invest-

ment products in which the insurance element is nominal (with in-

surance cover generally limited to the monies actually invested) are

viewed by the UAE Central Bank as investment products. Products

in which the amounts payable on death are a substantial multiple

of the premia are viewed as insurance products. In addition to

investment products, the UAE Central Bank has recently permitted

banks to collect premia and to distribute and to act as a point of sale

for registered insurance products issued by insurance companies

registered in the UAE.

Global Consultants and Services

(Anguilla) Limited - Anguilla

Carlyle K. Rogers - Managing Director

+1 264 498 5858

carlyle@gcsl.info

Afridi & Angell - UAE

Mr Amjad Ali Khan - Partner

00-971-4-330 3900

akhan@afridi-angell.com

Insurance.indd 2 18/9/09 17:40:36

Luxembourg legislation mainly follows the framework of the EU directives

with a focus on life-insurance and reinsurance legislations and with the

specificity that the reinsurance local legislation has influenced the prepara-

tion of the relevant EU directives as Luxembourg was and remains ahead of

most EU jurisdictions and one of the world’s leading center of expertise for

reinsurance activities.

We have seen side-effects due to the financial difficulties of certain financial

institutions, insurance companies and commercial groups on aspects of their

business not related to Luxembourg. Main effects on advice we give were

noted in the aspects of wealth management structuring that are inherent to

the life-insurance activity and were also noted in the reinsurance industry in

the context of stop loss policies as well as in the context of asset allocation.

Our specialised team has a long-standing expertise in all Luxembourg legal

aspects of insurance and reinsurance activities including the following:

Regulatory advice: Wildgen provides regular assistance and representation

in regulatory issues and communications with the Luxembourg Insurance

Commission such as for license applications, transaction approvals, restruc-

turings and portfolio transfers.

Life insurance advice: Life insurance is a core activity in Luxembourg and

Wildgen has a sound expertise in related matters such as distribution on

a cross-border basis, professional secrecy matters, anti-money laundering

procedures and the legal structuring of dedicated life-insurance

policies invested in securities or non-traditional assets for high net

worth individuals.

Reinsurance advice: Wildgen has a dedicated team involved in

reinsurance matters including in structuring and negotiating M&A

transactions relating to reinsurance companies.

Our client base has a very large and international scope. We

provide advice to local, regional and international insurance and

reinsurance entities as well as to corporate clients from SME to ma-

jor groups for their insurance and reinsurance needs. Over the last

months Wildgen has notably negotiated the acquisition of captives

for two international commercial groups and for an international

financial service group.

Wildgen is focusing on the development of sharia-compliant in-

surance and reinsurance products from Luxembourg. The existing

Luxembourg legislation offers highly attractive vehicles and legal

framework to structure sharia-compliant products but the experi-

ence of the financial place in such matters is still in its early stage.

Wildgen benefits from a locally quite unique position in this new

trend with the joint expertise of our insurance & reinsurance team

and our dedicated Islamic finance team.

We believe also that securitisation of insurance or reinsurance

risks and claims will be a new trend and Luxembourg has a key

role to play as jurisdiction to structure those transactions with the

combination of its highly efficient and competitive reinsurance and

securitisation legislations. Certain aspects need to be clarified and

improved to fully harmonize both instruments but discussions are

in progress within the Luxembourg insurance community and we

trust that there will be a positive outcome leading to attractive solu-

tions that our team is already working on.

“Straight-to-the-point advice is the hallmark of Lydian” - Legal 500

The people

Hugo Keulers joined Lydian in 2001. Mr Keulers frequently acts before the

Belgian Courts upon the instruction of international clients. He has worked

on referrals from the world’s most prestigious law firms, often acting for

listed multinational companies in complex cross-border disputes. He is also

in demand as a speaker at conferences on litigation and insurance and has

published articles in international publications.

Sandra Lodewijckx joined Lydian on 1 January 2002. Ms Lodewijckx is

specialised in insurance law and pension law. She assists Belgian and interna-

tional (insurance) companies, professional organisations and insurance inter-

mediaries in all insurance issues. She also advises companies on the different

aspects of supplementary pensions, corporate governance, pension plans and

management agreements. She holds experience in litigation on insurance

and pension matters.

The practice

As one of Belgium’s leading independent law firms, we have earned

an impressive reputation in the area of insurance and reinsurance,

both nationally as well as internationally.

Lawyers from our Insurance team, which is part of our Commercial

& Litigation department, have particular experience and expertise in

advising insurance companies about their regulatory framework and

providing assistance in discussions with the Belgian regulator as well

as in developing and advising on new insurance products and check-

ing whether the policy conditions comply with mandatory provisions

of Belgian law. Lydian’s insurance team also assists insurance compa-

nies with respect to the exercise of their activities in the framework of

the EU’s fundamental principles of freedom to provide services and

the freedom of establishment.

We regularly assist and represent Belgian and international

(re)insurance clients in litigation, a.o. in the following areas: profes-

sional liability, product liability, reinsurance, property and business

interruption insurance, coverage disputes, defense work and subro-

gation claims and insurance distribution. Over the past few years,

Lydian has been involved in litigation on the Belgian market involving

product liability, D&O liability, reinsurance, property and business

interruption insurance. This has given us highly valued expertise

and experience in handling complex policy disputes and subrogation

claims, very often with an international or cross-border dimension.

We also advise (re)insurance intermediaries on the field of applica-

tion of the law on intermediation in (re)insurance as well as on codes

of conduct, alternative forms of insurance intermediation, etc. We

also assist insurance companies in reviewing, drafting and negotiat-

ing their insurance distribution agreements with their insurance

intermediation network.

Lydian - Belgium

Hugo Keulers - Partner - Commercial

& Litigation department

+32 2 787 90 90

hugo.keulers@lydian.be

Sandra Lodewijckx - Counsel - Commercial

& Litigation department

+32 2 787 90 33

sandra.lodewijckx@lydian.be

Wildgen - Luxembourg

Michel Bulach - Partner

+352 40.49.60.228

michel.bulach@wildgen.lu

Insurance.indd 3 18/9/09 17:40:50